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ABSORPTION COSTING VERSUS THROUGHPUT COSTING
BUDGETED MANUFACTURING COSTS
DIRECT MATERIAL				$ 20	PER UNIT
DIRECT LABOR				$ 2	PER UNIT
VARIABLE OVERHEAD				$ 10	PER UNIT
FIXED OVERHEAD				$ 150,000
YEAR 1
NO BEGINNING INVENTORY
ACTUAL COSTS OF PRODUCTION EQUALS ABOVE MANUFACTURING COSTS
PURCHASE DIRECT MATERAILS OF				$ 200,000
INCUR SELLING AND ADMIN COSTS OF				$ 80,000
#UNITS PRODUCED				10000
# UNITS SOLD				9000
SALES PRICE OF UNITS SOLD				$ 100
YEAR 2
THERE IS BEGINNIN GINVENTORY
ACTUAL COSTS OF PRODUCTION EQUALS ABOVE MANUFACTURING COSTS
PURCHASE DIRECT MATERAILS OF				$ 160,000
INCUR SELLING AND ADMIN COSTS OF				$ 80,000
#UNITS PRODUCED				8000	UNITS
# UNITS SOLD				9000	UNITS
SALES PRICE OF UNITS SOLD				$ 100
REQUIRED:
1. PREPARE ALL JOURNAL ENTRIES FOR BOTH YEARS TO REFLECT THE ABOVE TRANSACTIONS
UNDER NORMAL ABSORPTION COSTING AND UNDER THROUGHPUT COSTING
2. CALCULATE THE NET INCOME FOR BOTH YEARS UNDER BOTH COSTING METHODS
3. CALCULATE GROSS MARGIN (THROUGHOUT) AND GROSS PROFIT PERCENTAGE FOR
BOTH METHODS AND BOTH YEARS

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